Pension Advice

amy2015

Could someone help me out please.. I am clueless when it comes to pensions...


I currently don't have a pension and I am looking to get one but it is a minefield. I have looked at money advice website and I understand the basics but where do I start.. and how to I pick one out of a number of providers, and how much is enough for a pension salary on retirement.


I opted out of the works Nest pension 6 months ago due to saving for a house but my logic is that I should opt back in at 5% employee contribution and 3% employer contribution from April onwards.


Now I would also like to pay a small amount on top of the nest into a private pension but where do I start and how much would you recommend, for it to be worthwhile? I looked at Virgin pension and they have lots of options based on risk, would I be best putting this into a higher risk one?


Or finally would I be best scrapping Nest and putting all of it into a private pension?


(I am 31 years old, I earn £38k)


Thanks in advance!
Amy

dunstonh

I opted out of the works Nest pension 6 months ago due to saving for a house but my logic is that I should opt back in at 5% employee contribution and 3% employer contribution from April onwards.

Correct. You are throwing away free money by opting out.

Also, by optinig out you become an "opt out". Many other pension providers will not accept "opt outs" unless an IFA signs off on the application. An IFA will not sign off on an application for an opt out because there is no logic in opting out. No other pension will come close to it because they will not have the free money from the employer.

Opting out was a bad decision. Not paying into your pension isnt going to help you save for a house beyond a month or two. Yet it will cost 30-40 years of lower income in retirement

Now I would also like to pay a small amount on top of the nest into a private pension but where do I start and how much would you recommend, for it to be worthwhile?

A recommendation on pensions is a regulated activity. Anything you read on this site is discussion and opinion only. Same goes for how much.

However, a very crude guide for people with no pensions is to take your age and half it. That should be the percentage ballpark you should be aiming for if you intend to retire at state pension age.
Using NEST would make sense. No point having two pensions at this stage.

I looked at Virgin pension and they have lots of options based on risk, would I be best putting this into a higher risk one?

Virgin is one of the worst pensions going. It is expensive and poor quality on investments.

(I am 31 years old, I earn £38k)

You are late starting but not catastrophic and it is recoverable. 15% of £38,000 is £5,700 a year. Which is £475pm. So, that is what you should be aiming for including the employer contribution.

Or finally would I be best scrapping Nest and putting all of it into a private pension?

That would cost you over £1100 a year by throwing away free money. Possibly more if the employer uses salary sacrifice. There is no logic in using anything else.

amy2015

Thank you Dunstonh, that information was very informative and helpful.


I know it was stupid of me to opt out and I didn't really think it through at the time, with Nest is it possible to opt back in?


If I contribute 15% per year how much income will that give me on retirement roughly?


Thank you


Amy

MallyGirl

Pensions use investments, not savings accounts, so you cannot say how much they will be worth in x years time. Investment values go up and down, but over the long term the trend is up. It is also likely to be more 'up' than you could achieve with savings accounts. Then there is the relief from tax, and also from NI if your employer offers salary sacrifice.

In very simple terms, if you contribute £5700 pa to a pension, and it makes 5% a year, then by the time you reach 67 it could be a pot of £378,000 which could allow you to draw out something like £15k per year (4% of pot) for the rest of your life (on top of your state pension). It won't be that even in growth but it gives you a bit of an idea. You put in £5.7k for 30 years and then you can might be able to take nearly 3 times that out for potentially 30 or 40 years.

xylophone

In your position I wouldn't have opted out of the pension and thereby lost the employer's contribution.

It seems to me to be wise to opt back in as soon as possible.

https://www.nestpensions.org.uk/schemeweb/memberhelpcentre/contributions/make-additional-contributions.html

amy2015

I know I am sure it became compulsory May 17 in our work place and prior to that I didn't have a pension, so I paid into it for 15months before I opted out. Thank you for everyone's advice I am now taking the steps to pay back into it.

Thank you

amy2015

Thank you, this is very helpful!